Those in the know about China often state that the country will grow old before it grows rich. Its corrupt communist leaders, aging population and maturing state of development mean the rapid growth it has enjoyed over the last ten years has come to an end.
But in an age of rapid development in formerly third world economies there is always someone ready to take over the engine of world growth.
As China falters, India is poised to blossom.
Prime Minister Narendra Modi’s government has begun to spend on road and rail building, starting much needed investment that has been put off for some time.
By doubling spending on roads and bridges in fiscal 2015/16, and raising the rail budget by a third, India is about to go a whole lot faster.
“They have acknowledged that infrastructure is the big elephant in the room,” said Vinayak Chatterjee, head of infrastructure company Feedback Infra.
“Once these measures are implemented, the elephant would start dancing, and with it the overall economy.”
Modi’s chief economic advisor, Arvind Subramanian, forecasts the investments will grow the economy more than one percentage point this year.
With last Friday’s data showing an economy growing at 7.5 percent last quarter the latest government spending could push growth to nearly nine percent. That’s well ahead of China.
Yet the key risk is whether various government ministries will actually spend the extra $11 billion they’ve been allocated for infrastructure this year. While they seem on-pace to do this, its a lot of money that needs to be spent in a short period of time.
To help with this allocation the government has prioritized infrastructure projects that have been planned but shelved due to bureaucracy, a lack of matching private sector investment, or litigation.
The government has recently eased rules for the private sector, and allowed financially stressed companies holding up projects to exit them without penalties.
The government is stepping up in their place to make things happen.
It will also ensure all public tenders have all approvals secured in a move that addresses a major reason why so many projects remain stalled.
As a result of the measures and spending, Modi’s government hopes road building will reach 19 miles a day by the end of next year from 7.5 miles presently. To help get there it plans to award projects for 6,300 miles of road this year, up a whopping 25 percent from last year.
While there are obviously issues to contend with in deploying this amount of money in such a short time and on such complex projects, India’s future is bright. With a young population and dynamic new leadership the country is set to finally launch.